Analysis: Rising Local School Property Taxes Ease State Budget Woes

by Ross Ramsey, The Texas Tribune
October 21, 2016

Editor’s note: If you’d like an email notice whenever we publish Ross Ramsey’s column, click here.

It would not be completely accurate to say billions in local school tax money is being used for general state spending.

But it wouldn’t exactly be wrong, either.

Property-rich school districts in Texas hate sending money to the state to help property-poor school districts. But the state has little incentive to change that system: Every dollar the rich districts send in is a dollar the state itself doesn’t have to spend.

The money coming in from those property-rich districts is quite a pile, too. For lawmakers writing the 2018-19 budget, that “recapture” money will increase by an estimated $1.44 billion, freeing that much state money for other general spending.

The richer school districts (“richer” here refers to the value of their real estate and not to the incomes of the residents) are sending $3.69 billion to the state in the 2016-17 budget period. The state has to use that money to public education; it’s an effort to level out the differences in how much money is available to educate kids from different parts of the state.

That said, any money that comes in from the rich districts allows the state to spend the dollars it would have spent on education on other programs and services. The numbers are rising, too. The Texas Education Agency estimates it will “recapture” $5.13 billion during the next budget period, up from $3.69 billion in the current budget.

At the same time, the agency’s official budget request to state lawmakers would require the state to spend 8.4 percent less from general revenue than the current budget a drop that’s partly attributable to the increase in recapture money available to the state.

Intentionally or not, it’s a great political deal for state lawmakers. They can squawk at local school districts for high property tax rates at the same time they’re using some of that money to lower the state’s expenses for public education.

The locally raised taxes recaptured from property-wealthy districts lower the amount of state-raised money — sales taxes and so on — that have to be spent on schools. Local taxpayers, in this case, are saving state taxpayers some money.

Intentionally or not, it’s a great political deal for state lawmakers. They can squawk at local school districts for high property tax rates at the same time they’re using some of that money to lower the state’s expenses for public education. The state budget is easier to balance because of the local tax money marbled into school spending.

Houston ISD’s voters are the latest to fall into this recapture business, joining voters in the 230 other Texas districts that were required to put some of their tax money in the state pot this year.

They’ll see it on the ballots when early voting starts next week — a proposition asking whether they are for or against “Authorizing the board of trustees of Houston Independent School District to purchase attendance credits from the state with local tax revenues.”

If the voters say yes, the school district will send the state an estimated $165 million next year. If they say no, approximately $18 billion in commercial property will be taken off of the district’s roll of taxable properties and assigned to a poorer district’s tax rolls. Either way, that $165 million will be leaving the district.

Some Houston officials — several school trustees and Mayor Sylvester Turner among them — believe and hope that a “no” vote will serve as a wake-up call to Texas lawmakers, prompting major revisions to the school finance laws.

Maybe, maybe not. They would not be causing new problems for the Texas Legislature of the kind that might prompt school finance reform. The courts can force such an effort, but it’s unlikely that Houston voters will.

If anything, Houston’s troubles ease pressure on the state lawmakers who have to write the next budget. Money is expected to be tighter for the next two years. If Houston’s property taxpayers are forced through school recapture to send $165 million to the state, that’s that much money those budget writers won’t have to find for public education. They can spend it somewhere else.

Put Houston into the mix with all of the other districts that send money to the state, and those budget writers are getting an additional $1.5 billion — give or take — from local school property taxes. Yes, that money has to be used for public education, but it replaces what the state would otherwise have had to spend.

That helps state budget writers in a year when lower oil prices and a cooling economy are cutting into the state’s income.

That, in political and legislative terms, is the opposite of pressure.

More columns from Ross Ramsey:

The Clinton campaign is buying television ads in Texas, but not enough of them to capture the attention of most TV viewers — or most voters. So what’s the deal?
Texas Democrats have pined for years for a candidate who could turn their luck around. Now they’re hoping a Republican will answer their prayers.

Regulators are deciding how much lobby wining and dining Texas lawmakers can accept without revealing their names. Hint: It’s a lot.

This article originally published in The Texas Tribune.